Renting an Unapproved Studio in NSW? Who May Be Responsible and What to Do Next

When a council says a rented studio, garage or workshop is not approved for residential occupation, the urgent question is not simply “Which party is at fault?” The safer first question is: “What does the written notice say, who is my landlord under each agreement, and where can I get safe housing advice?”

Quick answer: In NSW, responsibility may be divided between the property owner, the head tenant who sublet the space, the real estate agency and the local council. Start by obtaining the council’s written direction and mapping every contract and payment. A head tenant may remain responsible to the owner and may also have obligations to a subtenant. An agency is not automatically liable simply because it manages the main property, but it may face questions if it advertised, represented or knowingly arranged the use of a space as a home. Council enforcement and a private claim for rent, moving costs or other loss are separate issues. Prioritise safety and emergency housing support, and obtain tenancy or legal advice before withholding rent or refusing a formal direction.

Editorial note: This guide uses an anonymized housing scenario to explain a decision process. It assumes New South Wales and was reviewed on 27 August 2026. Local rules, the exact council document, the agreements and the facts control the outcome. This article provides general information, not legal advice.

The scenario: a “studio” that may not be a legal home

Consider a tenant who had been homeless for almost a year and rented a small self-contained space behind or beside a main house. The space looked like a studio apartment, but it may have been approved only as a workshop, garage or other ancillary structure.

The tenant did not sign directly with the property owner. Instead, a head tenant held a lease with the owner or the owner’s real estate agency and then rented the separate space to the tenant. The tenant understood that the owner had approved the arrangement, or at least had not objected to it. The same agency appeared to manage several spaces on the block, including the main house and another dwelling that was believed to be approved.

Later, the local council attended or contacted the occupants and said the studio could not be used as a residence. The tenant was suddenly facing another move, possible homelessness and a difficult question: if a professional agency was involved, why did no one identify the problem before rent was accepted?

That question is understandable. It is also legally layered. The person who owns the land, the person who signed the sublease, the agency that manages the property and the public authority enforcing planning rules may each have different powers and responsibilities.

Four different questions are often being mixed together

Before deciding who is “responsible,” separate these issues:

1. Planning or building approval: Was the space approved for the use being made of it? A label such as “granny flat” or “studio” is not proof of approval.
2. Physical habitability: Is the space structurally sound, adequately ventilated and otherwise fit to live in? Approval and physical condition overlap, but they are not identical questions.
3. Contractual responsibility: Who promised the tenant the right to occupy the space, collected rent and had authority to grant that right?
4. Misrepresentation or regulatory conduct: Did an owner, head tenant or agent make a statement—or omit an important fact—that reasonably led someone to believe the space could lawfully be used as a home?

An answer to one question does not automatically answer the other three. For example, a council’s planning concern may be strong evidence that the use needs to be investigated, but it does not by itself decide a private compensation claim against an agency.

Map the relationship before assigning blame

A useful starting diagram is:

Property owner → real estate agency → head tenant → subtenant

That chain may not describe every case. The agency might manage only the main house. The head tenant might have had written permission to sublet only part of the property. The tenant might have dealt directly with an owner or agency employee. The space might also have a separate address, description or agreement.

For each link, ask the following:

Do not assume that ownership alone makes the owner the only relevant party. Do not assume that signing a sublease makes the head tenant the only relevant party. Do not assume that an agency is protected from every issue because it did not sign the tenant’s agreement. The contracts and evidence decide which possibilities are worth pursuing.

What the owner may be responsible for

The owner generally controls—or has the ability to investigate—the property’s approvals, permitted use, construction history and ongoing maintenance. Under section 52 of the NSW Residential Tenancies Act 2010, a landlord has a general obligation to provide residential premises in a reasonable state of cleanliness and fit for habitation.

That does not mean every planning irregularity automatically produces a claim against the owner. The analysis may depend on whether the space was actually part of the residential premises, what the owner knew, what the owner promised, whether the owner authorised the subletting and what loss the tenant can prove.

The owner may also have a different contractual relationship with the head tenant than with the subtenant. A lease may describe a room, a separate structure or an entire lot in a way that matters later. The owner’s awareness of the sublease can also be important, because the head tenant generally needs the landlord’s written permission to sublet under NSW tenancy rules.

What the head tenant or sublandlord may be responsible for

In a subletting arrangement, the original tenant remains the owner’s tenant and remains responsible to the owner for the tenancy, including the subtenant’s actions. NSW Fair Trading’s guidance also says a tenant must obtain the landlord’s written permission to sublet or transfer any part of the property.

That makes the head tenant more than a bystander. The head tenant may have made the immediate promise that the subtenant could occupy the studio, collected rent and supplied the information on which the subtenant relied. Whether the head tenant knew the studio was not approved is a separate factual question. So is whether the owner gave written permission for the arrangement.

A head tenant who genuinely did not know about an approval problem may still need to help the subtenant respond, return or account for money, and communicate with the owner. Lack of knowledge may affect liability, but it does not make the contract chain disappear.

What the real estate agency may—or may not—be responsible for

A real estate agency’s role must be identified precisely. It may have:

• acted only for the owner under a management agreement;
• prepared or published an advertisement;
• shown the space to prospective occupants;
• collected rent or bond;
• communicated permission for a sublease;
• inspected the main house but not the separate studio; or
• known about council concerns and continued to describe the space as a residence.

Those facts lead to different questions. An agency is not automatically responsible for every defect or approval problem on land it manages. But neither is it automatically outside the dispute simply because the agency did not sign the subtenant’s agreement.

NSW Fair Trading guidance says real estate advertising and communications should not be false or misleading and should not conceal a material fact. The guidance also discusses representations about the characteristics of land and the use to which it may lawfully be put. That is a reason to preserve the original listing and messages—not proof that a particular agency breached the law.

For a rental dispute, ask:

1. Did the agency directly advertise or show the studio as a home?
2. Did anyone at the agency say that the space was approved, lawful or suitable for residential occupation?
3. Was the agency told about a council warning, prior inspection or restriction?
4. Did the agency collect rent, bond or application information for the space?
5. Was the agency managing the whole block, or only a different dwelling?
6. What loss followed from the alleged representation, and can it be documented?

These questions are more useful than a general argument that “the realty should have known.”

What the council can do—and what it usually does not decide

Local councils are involved in planning and development enforcement. The NSW Planning Portal explains that local development commonly requires development consent through a development application lodged with the local council. It also identifies residential development, secondary dwellings and changes of use as relevant development categories.

That is why a converted garage, workshop or studio should not be treated as a lawful home merely because it has a bed, bathroom or kitchen. The exact approval history, zoning, building classification and local planning instrument may matter.

Council’s role is different from the role of a tribunal deciding a private dispute. A council may issue an inspection outcome, direction, order or other compliance communication. That document may address whether and when the space can be occupied, what work is needed or what enforcement step is proposed. It may not decide who owes the tenant money for rent, moving costs, alternative accommodation or stress.

When council contacts you, ask for the following in writing:

• the exact address or part of the property covered;
• whether the document is advice, a direction, an order or another notice;
• the reason the use is said to be unauthorised or unsafe;
• whether occupation must stop immediately;
• the deadline for compliance or moving out;
• whether there is an available approval or remediation pathway; and
• the name and contact details of the relevant officer.

If there is an immediate physical danger, leave and contact emergency services where appropriate. If the issue is a planning or occupancy direction without an immediate physical emergency, obtain housing and tenancy advice promptly rather than relying on a verbal summary.

Preserve evidence before the listing or messages disappear

Create one folder and save original copies of:

• the head lease and any sublease or room agreement;
• written permission to sublet;
• the original listing, floor plan and property description;
• inspection messages and statements about the space’s use;
• rent, bond and utility payment records;
• council emails, notices, orders and inspection details;
• photos showing the studio’s layout and condition;
• messages about earlier warnings or approval questions;
• names and roles of people involved, with dates; and
• moving costs, storage fees, hotel costs and other housing expenses.

Keep a timeline with the date, person, communication, document and consequence. Do not edit screenshots in a way that removes context. Keep a private copy of documents containing addresses or personal information, and redact sensitive details before sharing them publicly or sending them to an adviser who does not need them.

A safer response plan when relocation may be urgent

Step 1: Stabilise housing and safety

If the council direction or the physical condition creates an urgent housing problem, seek help before negotiating compensation. In NSW, Link2home can be reached on 1800 152 152 for statewide homelessness information and referral. NSW Government says the service operates 24/7; accommodation referrals are generally available from 9am to 10pm, while overnight calls provide information and assessments and can refer to emergency services if needed.

Also contact the local Homes NSW office, a homelessness service, a community legal centre or a Tenants Advice and Advocacy Service. If you are in immediate physical danger, call 000.

Step 2: Ask for a written position from each party

Write to the owner or agency and the head tenant separately. Keep the message factual. Ask:

• Do you accept that the space was being used as a residence?
• What approval or compliance information do you have?
• When did you first learn of the council’s concern?
• Who authorised the sublease or occupancy?
• What is the proposed moving-out date?
• Will you help with alternative accommodation, moving costs or a bond arrangement?
• What is the process for collecting personal property and receiving a condition report?

Avoid making accusations you cannot yet prove. A clear written request is more useful than a long argument about motives.

Step 3: Get advice before taking a high-risk financial step

Do not stop paying rent, abandon the premises, refuse a lawful notice or remain in a space that council has directed you not to occupy solely because of informal advice. Rent, termination, bond and compensation consequences depend on the notice, the contract and the applicable law.

NSW Fair Trading says tenants should first read the agreement, try to resolve issues with the landlord or agent, and make requests in writing. Its dispute guidance identifies Fair Trading’s tenancy complaint service and the NSW Civil and Administrative Tribunal (NCAT) as possible pathways. A tenancy advocate or lawyer can help determine which forum fits the dispute and whether an urgent application is needed.

Possible claims are fact-dependent

A tenant may wonder whether they can recover:

• rent paid for a space that could not lawfully be used as a home;
• moving, storage or short-term accommodation costs;
• bond or prepaid rent;
• costs caused by misleading statements; or
• other proven loss.

Some losses may be legally recoverable; others may not be. The tenant may also have a duty to reduce avoidable loss, and the responsible party may dispute causation, knowledge, authority or the amount claimed.

Keep the categories separate. A council enforcement action is not the same thing as an NCAT order, a Fair Trading investigation, a consumer-law claim or a negotiated payment. Do not advertise a guaranteed compensation amount based only on the fact that the space was described informally as a studio or granny flat.

A decision framework for the first 48 hours

Where Pine fits

Open Pine to organise the lease, sublease, council notices, listing, messages, photos and bills into a dated timeline, identify unanswered questions and prepare a focused summary for a tenancy adviser, lawyer or housing service. Pine can help organise information; it does not provide legal advice, represent you or guarantee a result.

Frequently asked questions

Can a real estate agency rent out an unapproved studio in NSW?

The answer depends on the agency’s role, the property’s approval status, what was represented and what the agency knew or should reasonably have known. An agency is not automatically liable merely because it manages a related property, but direct advertising or misleading statements may create additional issues to investigate.

If I rented from a head tenant, is the head tenant the only responsible party?

Not necessarily. The head tenant may be the immediate party in the sublease and remains responsible to the owner under the head tenancy. The owner and agency may also have relevant responsibilities depending on authorisation, representations, knowledge and the contracts involved.

Does a “granny flat” label prove the space is legal?

No. Informal labels do not establish planning approval, building classification or permission for separate residential occupation. Check the written council position and approval records.

Does council have to compensate me if it says I cannot stay?

Not automatically. Council enforcement and private compensation are separate questions. Ask a tenancy adviser or lawyer to assess possible claims against the relevant contracting party, owner, head tenant or agency.

Should I stop paying rent as soon as I hear the space is unapproved?

Do not make that decision solely from informal advice. Withholding rent can create its own tenancy dispute. Get urgent, fact-specific guidance after reviewing the council document and agreement.

Can I stay until someone formally evicts me?

Do not assume that formal eviction procedure answers a planning, safety or council direction. If an authority says occupation must stop, obtain advice immediately about compliance, relocation and your tenancy rights. Never remain in an unsafe place just to preserve a possible claim.

What if leaving means I will be homeless?

Contact Link2home on 1800 152 152, local Homes NSW services and a homelessness or tenancy support organisation. Tell them clearly that you are at risk of losing your accommodation and give the date by which you need somewhere safe to stay.

Official sources

• NSW residential tenancy agreements
• NSW guidance on sharing a residential rental property and subletting
• Residential Tenancies Act 2010 (NSW)
• NSW guidance on resolving residential tenancy disputes
• NSW Planning Portal: local development and development applications
• NSW Planning Portal: development types and changes of use
• NSW Fair Trading guidance on real estate agent advertisements
• NSW Government homelessness support and Link2home
• Legal Aid NSW homelessness support

This article provides general information, not legal advice. Rules and remedies depend on the exact facts, contract, council document and jurisdiction. If you are facing an immediate safety risk or homelessness, seek urgent local help.